WS #15132
The US economy demonstrated unexpected strength in Q2 with GDP growing 2.2% year-over-year, significantly outpacing the 1.5% consensus forecast. Simultaneously, the Fed's preferred inflation gauge, Core PCE, cooled to 3.0% YoY, well below the 3.3% estimate. This combination of robust growth and disinflation supports a 'soft landing' scenario, reducing the probability of aggressive Fed tightening despite the 30-year Treasury yield hitting multi-decade highs of 5.67%. The market is now pricing in a stable macro environment, which favors broad equity valuations over defensive positioning.
US Macro Resilience and Inflation Cooling
The US economy demonstrated unexpected strength in Q2 with GDP growing 2.2% year-over-year, significantly outpacing the 1.5% consensus forecast. Simultaneously, the Fed's preferred inflation gauge, Core PCE, cooled to 3.0% YoY, well below the 3.3% estimate. This combination of robust growth and disinflation supports a 'soft landing' scenario, reducing the probability of aggressive Fed tightening despite the 30-year Treasury yield hitting multi-decade highs of 5.67%. The market is now pricing in a stable macro environment, which favors broad equity valuations over defensive positioning.